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Thought German might fit the Wagnerian mood of the markets today in a brief post discussing the economy. A few links on related tangents that I found intriguing, and then a brief comment:

John Robb –  A Real Nuclear Option in Finance

John relishes being not only out front but the edge thinker. He’s right that derivatives have to be addressed though I’m not qualified to comment as to “how”. I haven’t the faintest idea and the sums that derivative markets leverage vastly exceed our planetary GDP ( that’s right, not the economy of United States, the GDP  of planet Earth)  In particular, I wonder how you monkey with one class of derivatives without spooking the traders in other derivative instruments into stampeding us over a cliff in ten minutes. OTOH, Robert Paterson, who unlike me really does understand derivatives and the nuances of trading, agreed with Robb, who offered:

One solution: Nuke entire parts of the system. In short, destroy the system’s network connectivity. For example, credit default swaps ensure that failure will spread through internetworked contracts. Nuke CDS derivatives ($60 trillion or so) by making them illegal. Destroy parts of the network in order to save the remainder — firewalls and firebreaks.

Fabius Maximus –  No coins, no COIN

FM sees the economic crisis forcing huge changes in American foreign policy, defense structure, military doctrine and acquisitions:

In most of these money is no object in the pursuit of security (or other goals, often quite chimerical).  That is an exceptional way of thinking.  More so when one considers how our current account deficit has steadily increased since 1971 (when we went off the gold standard) – and the even more rapid increase in the foreign debts that finances the annual deficit.

That era will close soon, and the United States will return to earth.  Like everyone else, we will have to consider what foreign adventures we can afford before starting them – weighing their costs and benefits – and stop wars whose costs spiral out of control.  This will force a military revolution more profound than any since WWII, when we entered the “money is no object” era for weapons and foreign wars.  

….Not that the annual budget wars were not fought fiercely, but they will be conducted differently once budgets start their rapid and long-term decline.  Like any organization thrust into radically changed environment, restructuring – drastic changes in structure and doctrine – will be needed.

Maritime, air, and land – our approach to all will change.  Maintaining full-scale forces against purely theoretical future threats will become impossible.  Seeking dominance in every theater will become unrealistic.  Prioritization will become imperative.

FM also offers up  A solution to our financial crisis . Right now, China, the leader in global dollar reserves is in a position where our crash is their crash and their crash may be the end of the PRC as we know it. Good time to strike a deal.

Tom at HG’s World cites Niall Ferguson in Ferguson’s greatest area of expertise, as an economic historian:

The End of Prosperity, or A Better Future?

Historian and author, Niall Ferguson penned this article in Time magazine, about the question that is on everyone’s mind if not their lips. “Are we headed into a second Great Depression?”He begins: “Congress’s initial rejection of the Bush Administration’s $700 billion bailout plan calls to mind an unhappy precedent. Back in 1930, the Senate passed the Smoot-Hawley Tariff Act, which raised duties on some 20,000 imported goods. Historians define this as one of the critical steps that led to the Great Depression – a tipping point when the world realized that partisan self-interest had trumped global leadership on Capitol Hill.”He explains what happened to tip the scales.“The U.S. – not to mention Western Europe – is in the grip of a downward spiral that financial experts call deleveraging. Having accumulated debts beyond what’s sustainable, households and financial institutions are being forced to reduce them. The pressure to do so results from a decline in the price of the assets they bought with the money they borrowed. It’s a vicious feedback loop. When families and banks tip into bankruptcy, more assets get dumped on the market, driving prices down further and necessitating more deleveraging. This process now has so much momentum that even $700 billion in taxpayers’ money may not suffice to stop it.”

Like Tom of HG’s World, I’ve been a big fan of Ferguson and have numerous books of his on my shelf . That said, it’s very odd to me that he not mention another parallel with the Great Depression of a Federal Reserve in the hands of a relatively new Chairman after the long tenure of an outsized and much respected predecessor. Or the inability of the Fed to effectively coordinate with European counterparts ( several days after loudly bloviating about American weakness/incompetence by the German Finance Minister it appears that he might have better spent his time addressing German and EU economic fundamentals. Good Lord, even by politician standards, what an asshole!) which back then scrambled to ditch the gold standard like a poor relation carrying hepatitis.

The solution, if you can call it that, from my crude perspective would be to gather the Fed with other central banks, treasury and it’s G-8 finance ministry counterparts plus China and the biggest sovereign funds and agree on a few, very simple, lowest common denominator “brakes” or safety nets to backstop the system, plus a 2 year “hot money” flight tax to give a window of time to let the markets settle and work out clear minded reforms rather tha jerry-rigged insider looting binges posing as band-aids. That and driving what money/credit remains toward entrepreneurship and innovation rather than another burst of McMansion consumption by a demographic of dudes without any verifiable means of support.

This scheme won’t create any rainbows. It would be a tourniquet but better a tourniquet than an amputation.  If we come out with a recession on the scale of 1981-1982 we should consider ourselves to be fortunate. The Great Depression has begun to pass out of living memory but reviewing the mistakes of those years might be instructive.

Jeremy Young at Progressive Historians had a must read post on ZOTERO an emerging Web 2.0 tool for anyone out there doing academic research or analysis with even semi-serious intent:

Dan Cohen Lecture at IU

This afternoon, I was lucky enough to be able to attend a lecture by Dan Cohen, director of the Center for History and New Media at George Mason University. Since the untimely death of Roy Rosenzweig, Cohen has been the most recognizable face of the digital history revolution. He’s a real hero to history bloggers and digital historians alike.Cohen was an engaging speaker who mixed the infectious enthusiasm of a tech geek with the persuasive rhetoric of an entrepreneur — which is essentially what he is, only for the nonprofit tool Zotero, which he developed under Rosenzweig’s oversight. Much of the lecture was focused on Zotero and its emerging possibilities. Cohen informed us that Zotero was busily at work solving the historical problem of our time: the overabundance of data. Zotero is designed to sift through mountains of data and find things relevant to historians’ research interests. It’s now been translated into thirty-six languages, including Icelandic and Mongolian. Cohen said the latest developments include recommendation-sharing among historians and various forms of Web 2.0 social networking, including various plugins to Zotero that have been developed by programmers not affiliated with CHNM. Listening to Cohen go on about the endless possibilities felt like listening to Steve Wozniak in the days of the Apple ][ — incredibly cool, but not a little daunting.

Read the rest here.

Here is an intro video to Zotero. Comments from the techies in the readership are solicited:

Just purchased:

Persian Fire: The First World Empire and the Battle for the West

Discourses of Epictetus

For those in need of primary source material for researching the administration of President Richard M. Nixon, there is a wealth of material, much of it newly released, in audio and transcripted form at Nixontapes.org.

Hat tip to H-Diplo.

I have a new post up at Progressive Historians:

On Historians and Others….

….Historians are not theorists, though they may entertain certain theories in the course of interpreting an event they do not begin with answers as does a theorist but with questions. Questions they try to answer with research and evidence because history, while not a science, is an empirical discipline. Historians are not poets, they do not aim to create sweeping, romantic, myths, though like anyone else, historians admire mythic ideals but their task is to reveal where reality may have fallen short. Historians are not social scientists, though they sometimes borrow their tools; nor are they economists constructing abstract models hoping to predict events. A historian who tries to predict what will happen based upon the past is engaging in futurism, a very different and more difficult art.

….The public is not well prepared to handle or comment upon historical monographs of an esoteric or technical nature, only other specialists can do that. Nor are historians who have spent most of their career in a very rarefied subfield – say researching currency fluctuations in the Spanish Netherlands during the early modern period or Women’s social status in the Caribbean during the late Colonial era – well positioned to write a panoramic history of Western civilization, of the history of technology or similarly big picture subjects desired by the layman who wants to “read some history”. At least not without a major time investment.”

Read the rest here.